On behalf of Sayer Regan & Thayer of Sayer Regan & Thayer, LLP posted on Tuesday, October 19 , 2021.

Are you facing retirement? In order to preserve your assets while still being able to qualify for long-term care benefits, you may choose to gift your family members property, insurance, or another kind of asset. You may assume this is the wisest move in order to still be eligible for Medicaid or veterans’ benefits, but there’s a better way.

You may want to consider an irrevocable trust instead, which will give you control over where assets go and the way in which they’re distributed so you don’t lose them when you need them to pay for your long-term care.

There are two kinds of irrevocable trusts. An irrevocable living trust is created and activated while the grantor is still alive. In this case, assets aren’t subject to probate. An irrevocable testamentary trust is created while you are alive but is not actually activated until you pass away. These are part of a will and are not exempt from probate.

Irrevocable Trust vs. Gift

If you were to gift a family member an asset, you (the grantor) would have no control over how those assets are used after they leave your hands. You could become estranged from the recipient, or the recipient may make a foolish or bad investment decision and lose everything. If they die or get divorced, those gifted assets could go to the ex-spouse or child. You have no guarantees that you would be able to use those funds if and when you need them.

If you were to set up an irrevocable trust, on the other hand, you would have control over how the assets should be used and how they should be distributed. If you assign a third-party as a trust protector, he or she can act on your behalf when it comes to changing the amount of payments or how often they’re paid out, or even remove a beneficiary or a trustee.

In addition, an irrevocable trust offers many tax advantages over gifting. If you have a sizeable portfolio, an irrevocable trust will shield you from high federal estate taxes involving gifts over the lifetime tax-free gift limit instituted by the IRS.

Assets in an irrevocable trust can’t be used to pay out judgements or lawsuits. Let’s say you own a business or you’re a doctor. Your profession may make you more vulnerable to lawsuits, so putting your assets in an irrevocable trust protects them from creditors who are seeking to satisfy a court order or judgement.

If you have decided to create an irrevocable trust, it is highly advised that you meet with a lawyer skilled in estate planning, as these types of trusts are complex and complicated.

Contact Sayer, Regan & Thayer LLP for Irrevocable Trust Information

For more questions about irrevocable trusts vs. gifting, contact us toll free at 866-378-5836 or 401-324-9915 for a no-cost, no-obligation consultation.

These materials have been prepared by SRT for informational purposes only and are not intended and should not be construed as legal advice.